NEW YORK, 24 March 2018:
Speculators’ net short dollar bets rose to the highest in more than a year in the latest week, according to calculations by Reuters and Commodity Futures Trading Commission data released yesterday.
The value of the net short dollar positions, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, was US$21.99 billion in the week to March 20.
That compares with a net short position of US$14.61 billion the previous week. To be short a currency means traders believe it will fall in value.
The US dollar has been under pressure in recent weeks due to fears about trade protectionism with the imposition of US tariffs on steel and aluminum.
China yesterday urged the US to “pull back from the brink” as president Donald Trump’s plans for tariffs on up to US$60 billion in Chinese goods moved the world’s two largest economies closer to a trade war.
The dollar index .DXY, which measures the greenback against a basket of six other major currencies, was down 0.4% at 89.498, yesterday. For the week, the index lost nearly 1% and slipped close to a one-month low.
The net short positioning on the Japanese yen shrank to 21,999 contracts, the smallest since November 2016, from a net short position of 79,539 contracts, last week, the data showed.
The unwind in short positions comes as the yen has made rapid strides against the greenback, and follows years of the Japanese currency being used as a funding currency to buy high yielders.
The yen, often viewed as a safe-haven currency in times of market turbulence and economic uncertainty, partly because of the resilience provided by Japan’s current account surplus, rose to a 16-month high against the US dollar yesterday.
Meanwhile, speculators’ net short position on bitcoin Cboe futures shrank to 1,370 contracts in the latest week, from 1,716 contracts the previous week, the data showed.
Bitcoin was down 0.86% at US$8,629.73 on the Luxembourg-based exchange Bitstamp.
Bitcoin has lost nearly 40% of its value so far this year, hurt by increased scrutiny from regulators around the world led by the Securities and Exchange Commission. Other cryptocurrencies have tumbled in value as well.
“People seem to be being just a little cautious with so many headlines coming out, and wondering what the next headline could be and how the market is going to react to it,” said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
“Tactically, people are definitely being a little more cautious because of the uncertainties,” he said.
Expectations about shifting policy at global central banks were also injecting an element of uncertainty into currency markets, Tomes said.
Trump’s decision on Thursday to replace H.R. McMaster as national security adviser with John Bolton, a hawk who has advocated using military force against North Korea and Iran, could also be weighing on sentiment on the margins, Tomes said.
“Because it is coming in conjunction with all the other things at this moment in time, people might have a little bit more of a reaction.”
– Reuters